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GRAPH OF THE MONTH
The global yield drought
Growing pool of negative-yielding debt drags down returns (% share of bond market)
Source: ICE BofAML Global Fixed Income Markets Index
Investors are increasingly confronted with negative yielding bonds. Initially, these negative yields only showed up in sovereign bonds. However, since August, they have also infected the Investment Grade credit market. More and more bonds trade at negative yields because investors, like pension funds and insurance companies, are desperately looking for positive returns. Due to the lower rates they are ready to take on more risk (longer duration, less quality etc.) The graph shows how the breakdown of the global bond market has changed in terms of yield buckets. Only 0.4% of global bonds earn a yield of more than 5%. Negative yielding bonds (blue at the bottom) continue to gain importance. Interestingly, 50% of the global bond market consists of US bonds, which represent 88% of the still-positive-yielding bonds according to FT figures.